The most common component of local CTS schemes has been the introduction of a minimum council tax payment i.e. requiring everyone to pay at least some council tax regardless of income. But there are different ways that councils build this into their schemes and these differences are fundamental.
There are three ways of imposing a minimum payment. We will explain each in turn using the example of 20% minimum payment. And we will illustrate the difference it makes by using two hypothetical people both of whom have a council tax liability of £50 per month:
- Person 1 has a very low income. He gets full CTB of £50 per month so pays no council tax.
- Person 2 has a low income, but slightly higher income than person 1. He gets partial CTB of £30 per month so pays £20 per month in council tax.
NB: Graph enthusiasts might want to refer to the images at the bottom of the page as an alternative way of showing how the different types of minimum payment work as income increases.
1) Council Tax Support is based on 80% of Council Tax liability
In this situation everyone has to pay 20% of their council tax liability and then they can receive CTS to help them pay for the remaining 80%.
- Person 1 has to pay 20% of their council tax liability (20% x £50 = £10) and his CTS entitlement is based on the remaining £40. As he previously got full CTB he will get CTS for all of the remaining £40.
- Person 2 also has to pay 20% of his council tax liability (£10) and his CTS entitlement is based on the remaining £40. As he was previously assessed as able to pay £20 towards his council tax liability, under CTS he pays £30 in council tax (£20 plus the additional £10 that does not qualify for the CTS assessment). He gets £20 in CTS.
In this scenario both person 1 and 2 get £10 less a month under CTS then under CTB.
2) Council Tax Support is based on 20% of former Council Tax Benefit award
In this situation the CTS entitlement is calculated in exactly the same way as CTB but the final amount of benefit is then reduced by 20%.
- Person 1 under CTB got £50 which is cut by 20% (£10). So he pays £10 in council tax and gets £40 in CTS.
- Person 2 under CTB got £30 which is cut by 20% (£6). So he now pays £26 in council tax and gets £24 in CTS.
In this scenario person 1 gets £10 less and person 2 gets £6 less per month under CTS then under CTB.
3) Council Tax Support is capped at 80% of Council Tax liability
In this situation everyone has to pay at least 20% of their council tax liability but those who already pay more than 20% of their council tax liability are unaffected.
- Under CTB Person 1 paid 0% of their £50 council tax liability. In this scenario they have to pay 20% of their council tax liability (£10) and received £40 in CTS.
- Under CTB Person 2 paid £20 of their council tax which is more than the 20% of their £50 council tax liability. So under CTS they continue to pay for £20 in council tax and get £30 in benefit.
In this scenario person 1 gets £10 less under CTS then under CTB and person 2 is unaffected.
The table below summarises the impact of these scenarios. Its shows that those getting full CTB at the moment are affected in exactly the same way regardless of the type of minimum payment adopted. But for those getting partial CTB it makes a critical difference to how much they are entitled to under CTS.
Table 1: The amount of council tax paid by person 1 and person 2 per month under the CTB and the three types of minimum payment